Dear Mr Osborne

(and you can read-along, too, Mr Balls)

There is an important lever of economic management you’re both ignoring.

The poorer a citizen is, the more their expenditure benefits everyone.

They won’t save it (although they may use some to pay down debt, or at least hold creditors at bay.) They’ll spend it.

And they mostly won’t spend it on trendy consumables. They’ll spend most of it on basics – food, shoes, clothes, transport. You know, the stuff they need they can currently barely afford. So increase the spending power of the poor, the fairly poor, the less well-off….., and you’re basically giving the whole economy a sensible, controlled boost. There will be a lot of people just that much better off, better-fed, better-clothed.  Trade and employment can only benefit. And somewhere along the line, your tax receipts will perk up, too. Something for everyone – what’s not to like ?

And this doesn’t have to be state-funded (though you must know in your hearts that current rates of what was once called Social Security are shamefully low, and more generous benefit rates would also promote all the above effects listed above).

No, the main oomph could come from one simple source: higher wages at the bottom. (I know, I know……….squeals of pain and statesmanlike intimations of doom from some employers – but in truth the argument about the minimum wage. was won 15 years ago. And one day the living wage will seem a self-evident truth, too )

The case for making low pay as defensible as drink-driving has two legs – which is good. We’re all human ( I do try to believe you are, George), not stools.

The first leg is this. What right does anyone have to go into trade for profit (and have his trade confederation  plead the iron laws of profitability)  if his or her enterprise is not in fact profitable ? And that costing has to include buying in the necessary labour at a rate which allows the labourers to live on their wages, without state subsidy.

And the second leg is the argument set out above – steady expenditure by the majority in society who can afford to save, or spend on sillies, only marginally, if at all, is the bread, the staff, of economic life. It is good for everyone, (including the employers and entrepreneurs, provided they choose their services and  products sensibly).

All of this a propos of an excellent article by Katie Allen in today’s Observer, which I commend to all our readers: http://www.theguardian.com/business/2014/oct/26/lowest-paid-rise-productivity-puzzle-low-wage-growth-uk

3 selected quotes from the article – but please do read it for yourself.

” Labour says average wages after inflation are down £1,600 a year since 2010. Another estimate, from Professor Paul Gregg at the University of Bath, is £5,000 a year. Real wages are some 20% below where they would be had trend wage growth continued over the past six years, he says.”

“The Resolution Foundation has also looked at ordinary workers experiencing growth without gain. Its Commission on Living Standards highlighted distribution changes. In 1977, of every £100 of value generated in the UK economy, workers in the bottom half of the earnings distribution received £16 as wages; by 2010 this share had fallen to £12. Workers in the top 10% increased their share of value from £12 to £14 over the same period.”

“One solution to this problem of low and falling pay that is not talked about enough is simply to pay more at the bottom. How do you that before productivity rises? You do it so that productivity will rise.”